Saving has never been harder. The cost of living and a general fear of missing out means that many of us are spending and not saving enough every month.
There are a lot of reasons why people aren’t saving for their future like they should. The cost of living for many of us,
Make a Budget
If you’re operating without a budget, then you’re probably overspending or missing opportunities to save. Outline, to the cent, your exact costs for each expense. This breakdown will help you understand your living costs every month and how much you can save. The goal is to save a minimum of 10% of your monthly income. Most of us tend to focus on rent and essential bills, but don’t forget to include items such as entertainment, discretionary expenses, travel and clothing. If you have any hobbies be sure to include them as well. Be realistic, and don’t bury your head in the sand.
Consider a Side Job
A side hustle is a good way to make extra cash on top of your primary job. It can be anything from a night job, to running an Etsy store, to tutoring. A lot of people these days are becoming Uber drivers or food couriers for places like Just Eats and Foodora. If you have a vehicle, there’s a good chance you can make some extra money. If you have a talent like writing, graphic design or programming, there are lots of places where you can find a client or two to pay for your services. Another great option is teaching at community centres or after-school programs.
An Emergency Fund Can Make a Difference
Emergency funds exist to make sure your bills get paid if you lose your job or become ill or incapacitated. Ideally, you should set aside enough money to cover three months’ worth of bills. This money is earmarked for emergencies only, and should be kept separate from your other savings.
Pay Off More Debt
Paying off debt is a good feeling, but it can leave you lighter in the wallet every month, and force you to sacrifice things you enjoy. It won’t help you save more in the short term, but it will improve your credit score, meaning you’ll be eligible for lower interest rates as time goes on. Most importantly, once your debt is paid off, you can save that extra money. The best scenario is having little to no debt while reaching your earning potential, which is why paying off more debt as your salary increases will eventually result in more savings and greater financial freedom.
Financial Literacy is Key
Often overlooked but incredibly useful is understanding where your money is going, how taxes work and where you can invest. Take the time to learn about finances and saving by finding a mentor or asking the CRA or your accountant the right questions.
Get an RRSP and Set Up a TFSA, ASAP
A Registered Retirement Savings Plan (RRSP) is useful because you get rewarded for saving, since any contribution (if you’re within your limit) will count against your income, and less income means less taxes in most cases. There’s also Tax-Free Savings Accounts (TFSA), which are beneficial to people wanting to aggressively save. With these and other financial products, it’s always wise to speak with a financial expert, preferably one that’s impartial.
Lower Housing Costs
Look for ways to lower your housing costs, from taking on a roommate to renting out your garage. Make sure to check with your landlord, or, if you own, get an understanding the ins and outs of The Tenant Act.
Start Your Retirement Savings Early
When you first accept a job, it’s fair that retirement isn’t on your mind – but it should be. Start putting money aside from the moment you begin receiving income, and work with a financial planner to understand how starting to save early can lead to a happy retirement.
Set Up Automatic Savings Contributions
Banks make it easy to save, and one of the best ways to do so is by setting up your account so 30% of each paycheque is automatically put into savings. If 30% is too high, set it up for 10% and increase it as you go. Making saving a monthly routine will pay dividends in the future.
Ditch Unnecessary Expenses
This one is never popular, but in many cases monthly spending can be brought down by reviewing your expenses and removing any superfluous items. Do you really need accounts with Netflix, Amazon Prime and Crave? Are you eating out five nights a week? Do you need that car if you’re only a short walk from transit? Be honest. If there are any areas where you can cut expenses even a little, that’s just more money to add to your savings.
Saving as soon as you can is always a wise move. Sacrifice a little now and you increase the likelihood of enjoying greater freedom in the future.
Rob Shapiro | The Edge Blog